The amount of credit borrowed by households doubled in May compared with the previous month, while mortgage approvals continued to dip, according to new figures.
Consumer credit borrowing bounced back to £1.5 billion during the month, up from £800 million in April, Bank of England data showed.
It includes borrowing using methods such as credit cards, personal loans and car finance, which were all higher month on month.
Meanwhile, the number of mortgage approvals for house purchases dipped to 60,000 in May from 60,800 in April.
The figure is an indication of what future borrowing and house sales will look like.
And property buyers borrowed half the amount of money to secure their homes, from a total of £2.2 billion to £1.2 billion month on month, the Bank said.
More borrowing at higher rates, at a time when the cost of living is still high, should be cause for additional vigilance amongst lenders— Karim Haji, KPMG
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, suggested that the dip in mortgage approvals reflects “lingering affordability concerns causing borrowers to approach the market with caution”.
“Inflation may be easing, but persistently high borrowing costs are still making it hard for buyers to secure the homes they want,” she said.
“Interest rate cut hopes have been dashed throughout 2024, which is why all eyes are pinned on the next rate decision at the start of August when buyers and those looking to refinance are hoping for some respite.”
Others pointed to political uncertainty, ahead of the General Election on Thursday, leading people to delay getting on the housing ladder until they know what the next government will be.
Experts said the rise in consumer borrowing could partly reflect people spending more ahead of the summer holidays.
But some cautioned against people taking on more debt at a time when interest rates remain at a 16-year high.
Karim Haji, global head of UK financial services at KPMG, said the uptick should be “monitored closely by lenders”, adding: “Even if the Bank of England opts to cut the base rate at the next meeting, a likely 25 basis point cut would still leave the base rate above its long-run level.”
A 25 basis point cut would reduce interest rates from their current level, 5.25%, to 5%.
“With this in mind, more borrowing at higher rates, at a time when the cost of living is still high, should be cause for additional vigilance amongst lenders,” Mr Haji said.
Meanwhile, the amount of money households deposited with banks and building societies grew by £5.3 billion in May.
This was driven by an additional £4.2 billion following into ISA accounts, after a record-high inflow of £12.3 billion being locked into savings the previous month.
The figures aligned with the start of the new tax year, from April, with people taking the opportunity to withdraw money from taxable savings accounts and put it into tax-free ISAs.
